Appeal details
Counselvise Citation
[2018] 126 COUNSELVISE.COM (IT) 4267 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 6 month(s) 29 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-01-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Assessment Year
2012-2013
Appeal Filed On
06-06-2016
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.3353/DEL/2016 ASSESSMENT YEAR : 2012-13 DCIT, CIRCLE-3(1), CR BUILDING, IP ESTATE, NEW DELHI. VS. APCO WORLDWIDE (INDIA) PVT. LTD., 1005-1006, 10 TH FLOOR, KAILASH BUILDING, KG MARG, NEW DELHI. PAN: AAFCA8835M (APPELLANTS) (RESPONDENTS) ASSESSEE BY : NONE DEPARTMENT BY : MS ALKA GAUTAM, SR. DR DATE OF HEARING : 04.01.2018 DATE OF PRONOUNCEMENT : 05.01.2018 ORDER PER R.S. SYAL, VP: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE CIT(A) ON 10.03.2016 IN RELATION TO THE ASSE SSMENT YEAR 2012-13. ITA NO.3353/DEL/2016 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINS T THE DELETION OF ADDITION OF RS.1,09,06,277/- MADE BY THE ASSESSING OFFICER O N ACCOUNT OF DISALLOWANCE OF EXPENSES U/S 40(A)(I) OF THE INCOME -TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE CLAIMED EXPENSES OF RS.1,09,06,277/- ON ACCOUNT OF GROUP C HARGES UNDER THE HEAD OTHER EXPENSES. SINCE NO DEDUCTION OF TAX AT SOURCE WAS MADE BEFORE MAKING SUCH PAYMENT, THE ASSESSING OFFICER C ALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE DISALLOWANCE BE N OT MADE U/S 40(A)(I) FOR DEFAULT IN MAKING DEDUCTION OF TAX AT SOURCE U/S 19 5 OF THE ACT. THE ASSESSEE SUBMITTED THAT GROUP CHARGES WERE THE AS SESSEES SHARE IN THE OVERALL GROUP EXPENSES INCURRED BY THE FOREIGN GROU P COMPANIES FOR CORPORATE ADMINISTRATION, FINANCE SUPPORT, IT SUPPO RT, HUMAN RESOURCES, MARKETING AND LEGAL SUPPORT FUNCTIONS AND OTHER SER VICES. IT WAS FURTHER SUBMITTED THAT THE COSTS INCURRED BY THE GROUP COMP ANIES ON BEHALF OF THE ASSESSEE WERE RELATABLE TO THE ASSESSEES ACTIVITIE S WHICH HAVE BEEN RECOUPED FROM IT ON A COST TO COST BASIS. IT WAS, THEREFORE, CLAIMED THAT ITA NO.3353/DEL/2016 3 SINCE NO INCOME ELEMENT WAS INVOLVED IN THE PAYMENT , THE PROVISIONS OF SECTION 195 WERE NOT ATTRACTED AND, HENCE, NO DISAL LOWANCE WAS CALLED FOR U/S 40(A)(I) OF THE ACT. NOT CONVINCED, THE ASSESS ING OFFICER MADE DISALLOWANCE FOR THE SAID SUM, WHICH CAME TO BE DEL ETED IN THE FIRST APPEAL. 4. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVAN T MATERIAL ON RECORD. THERE IS NO APPEARANCE FROM THE SIDE OF TH E ASSESSEE DESPITE NOTICE. WE ARE, THEREFORE, PROCEEDING TO DISPOSE O F THIS APPEAL EX PARTE QUA THE ASSESSEE BUT ON MERITS. IT IS AN ADMITTED POS ITION AS EMANATING FROM THE IMPUGNED ORDER THAT THE AFORESAID PAYMENT MADE BY THE ASSESSEE REPRESENTS ITS SHARE IN THE EXPENSES INCURRED BY TH E GROUP COMPANIES ON COST TO COST BASIS. NO MATERIAL HAS BEEN BROUGHT O N RECORD BY THE LD. DR TO DEMONSTRATE THAT IT WAS NOT A REIMBURSEMENT BUT A PAYMENT MADE WITH SOME MARK-UP HAVING PROFIT ELEMENT. IT IS A SETTLED LEGAL POSITION THAT WHEN REIMBURSEMENT OF EXPENSES IS MADE WHICH DOES N OT INCLUDE ANY MARK UP OR PROFIT ELEMENT, THERE CAN BE NO QUESTION OF TAXING SUCH AMOUNT IN THE HANDS OF THE RECIPIENT. ONCE A PARTICULAR AM OUNT IS NOT CHARGEABLE TO ITA NO.3353/DEL/2016 4 TAX IN THE HANDS OF THE NON-RESIDENT RECIPIENT, THE QUESTION OF APPLICABILITY OF SECTION 195 DOES NOT ARISE. RECENTLY, THE HON BLE SUPREME COURT IN DIT(I.T.) VS. A.P. MOLLER MAERSK A/S (2017) 392 ITR 186 (SC) HAS HELD THAT ONCE PAYMENT IS IN THE NATURE OF REIMBURSEMENT OF EXPENSES, THAT IS, IT IS A COST SHARING ARRANGEMENT, IT CANNOT BE INCOME CHARGEABLE TO TAX IN THE HANDS OF RECIPIENT. SIMILAR VIEW WAS EARLIER TAKEN BY THE HONBLE BOMBAY HIGH COURT IN DIT VS. WIZCRAFT INTERNATIONAL ENTERTAINMENT P. LTD . (BOM) (2014) 364 ITR 227 (BOM) HOLDING THAT PAYMENT BY WAY OF REIMBURSEMENT OF EXPENSES IS NOT TAXABLE IN INDIA. IN VIEW OF THE FACT THAT THE AMOUNT PAID BY THE ASSESSEE TO NON-RESIDENTS IS NOT CHARGEABLE TO TAX IN THEIR HANDS AND, AS SUCH, THE PROVISIONS OF SECT ION 195 OF THE ACT ARE NOT ATTRACTED, THERE CAN BE NO QUESTION OF APPLYING SEC TION 40(A)(I) FOR MAKING DISALLOWANCE IN THE HANDS OF THE ASSESSEE. WE, THE REFORE, UPHOLD THE IMPUGNED ORDER AND SUSTAIN THE DELETION OF DISALLOW ANCE MADE IN THE ASSESSMENT ORDER. ITA NO.3353/DEL/2016 5 5. IN THE RESULT, THE APPEAL FILED BY THE REV ENUE IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 05.01.20 18. SD/- SD/- [SUDHANSHU SRIVASTAVA] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 05 TH JANUARY, 2018. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.
